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The perils of first-order conditions of New Keynesian models

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  • Kim, Minseong

Abstract

For deriving equilibrium of sticky-price/monopolistic competition New Keynesian models, first-order conditions are often used. This paper shows that they may not be sufficient and presents a case out of a simple model where there exists no equilibrium. This is true even when Taylor rule is assumed.

Suggested Citation

  • Kim, Minseong, 2016. "The perils of first-order conditions of New Keynesian models," MPRA Paper 70753, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70753
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    References listed on IDEAS

    as
    1. Kim, Minseong, 2016. "How accounting accuracy affects DSGE models," MPRA Paper 70356, University Library of Munich, Germany.
    2. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
    3. Galí, Jordi, 2020. "The effects of a money-financed fiscal stimulus," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 1-19.
    4. Kim, Minseong, 2016. "How accounting accuracy affects DSGE models," MPRA Paper 70404, University Library of Munich, Germany.
    5. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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